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The Retail Apocalypse is a Lie

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Posted by Greg Guenthner - The Rude Awakening

on Wednesday, 27 September 2017 06:29

 

  • Dead malls spring back to life
  • The start of a huge rally?
  • Plus: The best names in cheap retail

The retail apocalypse is a lie.

Don’t get me wrong — the stock losses racked up by the big mall anchors are very real. We’ve spent most of 2017 digging into troubling numbers posted by the prominent brick and mortar retailers. They aren’t pretty. Everyone knows that the first half of the year was a disaster for the mall anchors, with no relief is in sight for some of these troubled companies.

But there’s more to the “death of retail” story than these struggling stores. Watching iconic brands close locations across the country has warped our brains. We see pictures of vacant malls on the news and assume the American shopper has taken his business online for everything from big screen TVs to socks and underwear.

Will we ever leave our homes for the local shopping center again?

Absolutely. 

If you dig into the numbers, you’ll find that aside from the high-profile closings, brick and mortar retail is expanding this year. According to IHL Group, U.S. retailers will open 1,326 more locations than they will close in 2017.

Despite popular belief, every single retailer in the country isn’t about to declare bankruptcy. As we’ve said from the start, the best businesses will adapt and survive, whether we’re talking online start-ups or brick and mortar retailers.

The market’s finally starting to catch onto this idea…

For starters, the retail sector halted its nasty year-to-date plunge last month. It’s now quietly on the cusp of breaking out of the downtrend that has held the sector hostage all year.

BrickMortarBottoms

The failed breakdown in late August appears to have sealed the downtrend’s fate. The bears have overplayed their hand and are now susceptible to a face-ripping rally if these poor little retail names can catch a little momentum…

In fact, we’ve already seen select retail stocks rise from the rubble.



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Real Estate

New Mortgage Rules could be announced any day now

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Posted by Kyle Green

on Tuesday, 26 September 2017 14:12

interest rateThe Canadian government isn’t quite done meddling with the housing market. Instead of focusing on those putting less than 20% down like most of the changes over the past decade, this will be hitting borrowers who have more than 20% equity. Although there is not 100% certainty on what guidelines will change, the most commonly discussed option is for the government to apply the “stress test” to all mortgages funded by federally regulated lenders.

Last October the stress test was announced which requires all borrowers putting less than 20% down to qualify at the benchmark rate which is currently 4.84%. Previously only variable rate mortgages or mortgages with terms of less than 5 years had to qualify at the benchmark rate, so taking a 5yr fixed was a commonly chosen option to qualify. The change reduced borrower eligibility for those who would be taking a 5yr fixed by 20%. Currently with 20% taking a 5yr fixed rate is still a way to qualify at the actual rate, not the benchmark. The government is looking to likely close this option which will reduce borrowing power by 20%. This will reduce incentive for borrowers to take 5yr fixed rate mortgages and enter more variable rate contracts as there is no qualification incentive to take the perceived “safer” option of the longer term rate.

We have heard from a few lenders that they worry the next round of changes will impact some of their lending products. One lender in particular has a “net worth” program which allows borrowers to not need an income to qualify for a mortgage, which has been a dying breed in today’s lending climate as lenders fear government auditing and wrist slapping for non-income qualifying loans. It is possible that this next wave of changes brings about further restricting lenders to lend based on their comfort level and pushes more borrowers to seek more expensive alternative lenders.

There is a possible reconsideration of launching these guidelines however. Toronto’s market has dropped considerably over the summer and most other markets in Canada has been fairly flat over the past few months. It is possible that they tap the brakes on launching new guidelines for fear of sending some markets like Toronto is a more aggressive tailspin.

What should you do?

If you are looking to buy with 20% down or want to refinance to unlock equity to invest, you may want to look at doing this sooner rather than later. The government has been more apt to moving swiftly once changes are made so policies may come into effect quickly.

Also, consider that Credit Unions are provincially regulated, not federally regulated. Over the past few years this has given them a few competitive advantages when it comes to qualification guidelines. Further government changes may widen this gap and give Credit Unions a larger piece of the mortgage pie, if they want it.



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Real Estate

Home Prices Soar in Disaster-Prone Areas

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Posted by Robert Zurrer

on Thursday, 21 September 2017 06:13

c40035aa-a8bd-4d4f-b03b-0d1426176e88It’s been a bad few weeks for natural disasters.  A series of hurricanes ripped through Texas, Florida, and the Caribbean, killing hundreds and racking up hundreds of billions of dollars in damage. Wildfires are raging in the Western U.S., and a pair of powerful earthquakes have battered Mexico.

Amid the terrifying recent events is a worrisome finding from a new report: The parts of the U.S. most at risk of natural disasters are also the places where property values are highest and increasing most quickly.

 ATTOM Data Solutions, curator of the nation’s largest multi-sourced property database, today released its 2017 U.S. Natural Hazard Housing Risk Index, which found that median home prices in U.S. cities in the 80th percentile for natural hazard risk (top 20 percent with highest risk) have increased more than twice as fast over the past five years and over the past 10 years than median home prices in U.S cities in the 20th percentile for natural hazard risk (bottom 20 percent with lowest risk).

....continue reading HERE (be sure to view the 2017 Natural Hazard Housing Risk Heat Map) 



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Real Estate

"Real" Gold & Real Housing Price of Van+Cal+Tor & Priced in USD

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Posted by Brian Ripley's Canadian Real Estate Charts

on Wednesday, 20 September 2017 03:56

"Real" Gold (click image)

1chart-ratios-real-gold-re 9 orig

The chart above shows the "real" price of the TSX real estate index (RE/CCI green dotted plot line) and the "real" price of the TSX gold index (Gold/CCI yellow dotted plot line).

Real Housing Price (click image)



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Real Estate

Home ownership bounces from a 50-year low

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Posted by Steven Saville - The Speculative Investor

on Tuesday, 19 September 2017 06:45

In a 2015 blog post titled “Unintended Consequences” I explained that policies implemented by the Clinton and Bush administrations to boost the rate of home ownership not only had unintended consequences, but the opposite of the intended consequence. This post is a brief update on the US home ownership situation.

As evidenced by the following chart, the government was initially successful in its endeavours. The home-ownership rate sky-rocketed during the second half of the 1990s and the first half of the 2000s as it became possible for almost anyone to borrow money to buy a house. As also evidenced by the following chart, the home-ownership rate subsequently collapsed. The collapse was an inevitable consequence of people throughout the economy first responding to the Fed’s and the government’s incentives to take on excessive debt and then finding themselves in drastically-weakened financial situations.

The home ownership rate ended up bottoming in Q2-2016 at a 50-year low.

homeownership 190917

No one in the government or at the Fed has ever admitted culpability for the mortgage-related debt binge that led to the spectacular rise and equally-spectacular fall in the US home-ownership rate. Apparently, it was a market failure.



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